I’ve noticed something important happening inside the Federal Reserve these days. The internal debate has shifted radically—not “when will we start cutting rates,” but rather “under what conditions we might have to raise rates.” It’s a significant paradigm shift.

Nick Timiraos of the Wall Street Journal reported this turning point on May 2 as the moment when the Fed actually crossed a crucial threshold. In the minutes of Wednesday’s policy meeting, three regional Fed presidents—Logan of Dallas, Hamack of Cleveland, and Kashkari of Minneapolis—formally objected to the language suggesting the next move will be a rate cut. This is the first dissent on this wording since September 2020. Practically a rare event.

What strikes me is how Powell, in his latest press conference, fully validated the dissidents’ arguments, calling them “fully valid” while describing the discussions as “intense.” He didn’t remove the dovish guidance for procedural reasons, but the message is clear: that dovish language will not survive the next meeting under new leadership. In effect, the Fed has partially shifted the signaling away from a potential rate cut toward a neutral “wait and see” posture.

The catalytic element is the Strait of Hormuz. Unlike a transient price shock, this disruption is structural—a supply chain restriction that could keep energy costs high for months, fueling inflation expectations right when the Fed hoped to pivot toward easing. Kashkari explicitly laid out a scenario for rate hikes in a speech on Friday, warning that increases might be necessary even at the cost of weakening the labor market. William English, a former senior Fed economist, added that keeping rates unchanged while inflation rises is becoming an increasingly difficult “passive easing” to justify.

The timing is also interesting for another reason. Kevin Warsh will assume the Fed presidency in mid-May, inheriting a significantly divided institution. The next FOMC meeting is scheduled about a month after Powell’s departure—meaning Warsh will preside over his first meeting in a scenario where the committee is actively debating whether the next move will be a hold, a rate cut, or potentially the first increase in the current cycle. It arrives at a time far from calm.

As for Bitcoin and risk assets, the Fed’s shift from dovish signals to a neutral wait-and-see stance removes one of the pillars that had supported the April recovery narrative. Markets had priced in potential easing as support for risk assets, but with the June meeting showing a 94.9% probability of holding steady and scenarios for rate hikes being discussed openly by Fed officials, the backdrop has become materially less favorable. Bitcoin’s inability to sustain moves above $79,000 may partly reflect this repricing of the rate path—a headwind that could persist until the Hormuz situation is resolved and inflationary pressures ease.